Drafting Issues Which Impact Non-Federal Royalty: An Analysis of Selective Current Market Forces

Most certainly drafters of oil and gas contracts are constantly reacting to “circumstances and time” when reviewing case law, statutory enactments and rulemaking for potential drafting impact on documents typically used. But since one drafter's problem is another drafter's solution, there are unlimited choices as to drafting suggestions. In an attempt to narrow the focus of this paper and to compliment the other papers presented at this institute, the authors provide selective practical suggestions and comments on drafting issues emerging from current market forces — additionally limiting the commentary to issues which have a direct impact upon non-federal royalties.

INTRODUCTION

Corporate personnel who draft typical oil and gas agreements have a natural bias toward standardization of agreements. Consistency of terminology has been an important aspect of administering the thousands of contracts held by companies. Also, the ultimate marketability of the properties involved is affected by “known” operating parameters. The amount of variation from the standardized forms is clearly related to the amount of market power by the party requesting the changes and in this regard, as a general proposition, it seems lessors have not recently gained any increasing leverage. However, it is also generally observed that reputable corporate drafters have not been continually r

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